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Types of Investments that form an investment portfolio

The components on an investment portfolio are determined by the types of investment the investor wishes to invest in. having learnt about the basic terminologies in the investment environment, I believe we are on the same page to look at the various types of investments.

Types of investments

  1. Securities or Property: 

Securities include stocks(shares), bonds, options whereas Real Property: land, buildings, machinery. The tangible Personal Property which includes gold, artwork, antiques, etc are also included in this category.

2. Direct or Indirect

With the direct investment, the investor directly acquires a claim on a financial asset say for example stock. On the other hand, with the Indirect investment, the investor owns an interest in a professionally managed collection of securities or properties.

    3. Debt, Equity or Derivative Securities

–Debt: investor lends funds in exchange for interest income and repayment of loan in future (bonds)

–Equity: represents ongoing ownership in a business or property (common stocks)

–Derivative Securities: neither debt nor equity; derive value from an underlying asset (options)

    4. Low Risk or High Risk

–Risk is the chance that actual investment returns will differ from those expected. with this in mind, there can therefore be a high risk investment and a low risk investment basically differentiated by how likely the deviation from expected returns is likely to unfold.

    5. Short-Term or Long-Term

This type looks at the time to maturity of a given investment. Owing to this fact, Short-Term investments mature within one year while Long-Term investments have maturities of longer than a year.

6. Domestic or Foreign

This type is on the basis of the geographical jurisdiction in which the investment is undertaken. Domestic investment is where a citizen invests in a company or securities within his own country of origin or citizenship Kenyan whereas Foreign investment is the opposite of the above where an investor invests across boundaries in the securities or company in a foreign country.

Those are the various types of investments. Let’s now look at the Suppliers and Demanders of Funds in the Investment environment.

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